Mr Baker said: “Angela Merkel rang the Prime Minister and asked him effectively to defer the arrangements that had been carefully negotiated.

“He agreed, idiotically, and got something inconsequential in return.

Warning: Norman Baker claims David Cameron could have spotted the scandal

“What we saw then was Cabinet ministers writing formally to the Prime Minister and the Foreign Secretary to complain.

"The motor industry at the time was furious, The industry was saying to me, ‘Is the prime minister on our side or the side of German ­manufacturers?”’

VW is recalling 11 million diesel cars for modification. Britain will not follow Switzerland’s ban on sales.

Labour MP Louise Ellman, chairman of the Commons transport committee, said the claims raised a “very big question” about outside influences on what should be matters of public safety.

She said the whole testing system needed to be examined and made independent of the car industry.

Under-fire: Volkswagen has been accused of cheating on its diesel exhausts (Image: Getty)

She added: “There is certainly a major question about the influence of the motor industry against the interests of the public.

“The whole issue of independence I think is the key issue here. Testing should be independent of manufacturers and of government and it doesn’t seem that that has been the case.”

Ms Ellman spoke out as the Government said there were no plans to follow the lead of Switzerland and ban sales of VW diesel models which could have devices capable of tricking emission tests.

Up to 1.5million diesel cars sold in the UK by the German firm under its VW, Audi, Skoda and SEAT brands over the past five years are believed to have been fitted with illegal software that allows them to cheat emission tests.

Volkswagen’s UK boss Paul Willis has pledged to personally contact British drivers whose diesel cars needed to be recalled and modified if necessary as part of a worldwide recall of nearly 11 million vehicles.

Louise Ellman: She has called for testing to be independent (Image: PA)

The move came as VW motor dealers were besieged by hundreds of thousands of owners wanting to know how to return their newly bought cars after the company admitted rigging pollution checks to pass stringent emission tests in the US.

All UK car manufactures came under new pressure to come clean over the accuracy of their emission and and fuel economy tests.

Which? executive director Richard Lloyd said: “If the industry is to rebuild trust with consumers, manufacturers must come clean about the reliability of their emissions and fuel economy tests immediately.

“At the same time the Government must set out an urgent timetable for action including how consumers will be given quick and easy access to compensation, and how they intend to stop this from happening again.